The invention is related to a credit card system and in particular to the implementation of a pre-paid credit card system including the creation and usage of a pre-paid credit card and the offering for sale at retail locations pre-paid credit cards in any amounts the card issuer may deem fit.
Already in use are three types of consumer credit cards and pre-paid calling cards. There are: (a) bankcards issued by a bank or other financial institution typical examples of which are MasterCard®, and Visa® cards; (b) a charge card such as issued by American Express® in a series; and the private label cards issued by merchants like Macy's, Best Buy, the Home Depot and so on. Some are issued and serviced by the merchants and some are issued and serviced by financial institutions.
The bankcards allow users to purchase goods and services and charges can be paid off monthly or have a portion paid monthly with remaining balance subject to interest. Some financial institutions may charge annual fees. There are different levels of these cards ranging from a standard card, to a Gold Card or Platinum Card with different annual charges and services. The credit provider sets a dollar amount limit depending on the credit worthiness of the cardholder. The merchant pays an interchange fee based on a percentage of the amount of the individual charge.
The charge card is a card such as the American Express® series of cards. They allow the user to charge purchases and services to the account. The charge balance is expected to be paid in full monthly. There is therefore no interest charged. The purchase limit on such a card is usually not geared to any amount but based on the user's usage history. The cardholder pays an annual fee and the merchant also pays a fee similar to the interchange fee based on the level of purchases.
The private label card is issued and serviced by and on behalf of a merchant such as Best Buy, Macy's and the Home Depot by a financial institution. Some of these private label merchants also issue and service their own cards. The transaction works very similar to a bankcard. The usage is usually limited to the merchant issuing the credit card. The user pays monthly charges or interest on the unpaid balance as with the bankcard. The merchant pays the financial institute a fee similar to the interchange fee paid for a bankcard, though lower.
The cards issued by private label merchants usually pay a higher interest rate than holders of bankcards. Merchants prefer not to pay the higher interchange fees associated generally with available bankcards or the American Express card.
There is a need for a pre-paid credit card that affords the consumers a chance to avoid high credit card interest, being limited in their credit line and the merchants are assured of hassle-free payments because pre-paid credit cards have the same value as instant cash. The pre-paid credit card also affords the user, a unique chance of having access to a credit card without having his or her credit history or the lack of it stand in the way. The user puts up his or her money and therefore is not subject to lenders' rules and regulations.